Benjamin Hallen

Research interest: Entrepreneurship, venture capital, technology strategy, organisation theory
Qualification: PhD [Stanford University], Assistant Professor
Nationality: American
At LBS since: 2011
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For many aspiring entrepreneurs, the hunt for venture capital is a tale of frustration and woe. Yet a minority of entrepreneurs, sometimes viewed as the lucky few, appear to raise money with relative ease.

It turns out there is a roadmap to venture fundraising success. My research with Stanford University’s Kathleen Eisenhardt, which came out in the Academy of Management Journal last year, identifies four hallmarks of efficient prospecting for money. By efficiency we mean attempts that take less than two months of formal, near full-time fundraising, while yielding offers from desired investors.

Our conclusions are based on extensive fieldwork, tracking and reconstructing the ways nine Internet security startups sought multiple rounds of venture capital over their first five years. We sampled companies in Silicon Valley and across the U.S. that had already raised at least one investment round before entering our study.

Conventional wisdom states that successful fundraising requires introductions to investors, a clear pitch and the ability to signal the presence of a high-quality founding team. We found these practices aren’t enough – especially for the majority of entrepreneurs who have not previously been backed by targeted investors. Rather, efficient fundraising depends on four catalyzing strategies as well.

Step 1: Casual Dating. Efficient entrepreneurs meet informally, but deliberately and repeatedly, with a few investors a couple months before formally seeking an investment.

At one startup, the founder strategically courted venture capitalists by seeking their advice on his business model over a series of casual lunches. “You’ll talk about the business and stuff,” he told us, “but you won’t pitch. And you won’t go to the partner meeting and you won’t let them do diligence on you.”

These occasional lunches continued for several[…]